Felix Zulauf's yen for Japan

(4:24)

The hedge fund manager explains why he expects Japanese stocks to climb — and why investors need to tread carefully to avoid getting tripped up by currency devaluation.

The drop in Japan came as the dollar
USDJPY, +0.00%
weakened to dipped as low as ¥89.39 during the session, with markets focused on the two-day policy meeting at the Bank of Japan that earlier in the day. The move followed after the greenback on Friday topped ¥90, a level it hasn’t seen since mid-2010.

The dollar has surged against the yen since late last year amid growing expectations that the BOJ will ramp up deflation-fighting measures to boost the Japanese economy. But the monetary easing expected of the BOJ may have a positive impact beyond the country’s borders, one analyst said.

Tim Condon, head of Asia research at ING Financial Markets Research, called it “the biggest source of upside risk to the global economy.”

“We think an open-ended commitment to increased accommodation would need to be supported by increased asset purchases — what the Fed has done with QE3 — and policy interest rate cuts, for the risk scenario to become the base case,” Condon said.

QE3 refers to the third round of the U.S. Federal Reserve’s quantitative easing, an asset purchase program that boosts liquidity.

In Shenzhen, both the yuan-denominated A shares and the Hong Kong-dollar priced B shares of property major China Vanke Co.
CVKEY, +0.00%CN:200002
surged 10%. The jump came after the firm late last week said it would move its Shenzhen-listed B shares to Hong Kong.

South Korean stocks haven’t done so well lately, as many of the country’s exporters compete directly, with Japanese rivals currently benefitting from a drop in the yen against a range of currencies including the Korean won.

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